Software and Vendor Selection

Overview
• This chapter will discuss how that is usually not the case and how,
from the beginning, to best position a company to implement an
ERP successfully.
Objectives
• Understand the initial steps in the process for the successful
purchase and implementation of an ERP system.

• Determine the total cost of ownership and what it is to partner

with an ERP vendor.

• Understand why the first steps in the purchase of an ERP are

critical to the change management process.

• Identify the steps involved in negotiating a contract with a vendor.

Contents
• Vendor Research
• Matching User Requirements to Features
• Request for Bids
• Vendor Analysis and Elimination
• Contract Management and License Agreements
 Introduction
• The selection of a vendor that best meets the needs and
long-term direction of the company is a critical first step
in a successful implementation.

• In selecting a vendor, a well-understood selection

process will need to be utilized.

• The company may want to hire a specialized

consulting firm to assist in the selection process.

• The steps involved in selecting a vendor generally are

based on best fit of an ERP to business functions and
the overall ERP vendor’s product performance in the
market.
High Level ERP Purchase Process
1. Vendor research and information gathering
2. High-level vendor demonstrations and evaluation
3. Needs and requirements assessment
4. Development of request for bid or proposal
5. Release request for bid to vendors
6. Analysis and selection- Evaluation of bids, Functional
evaluation, Technical evaluation, Vendor-detailed
demonstrations, Contact references, Develop a total
cost of ownership
7. Vendor negotiation,
a) Contract review and change,
b) Pricing- software, maintenance, and consulting, support
8. Purchase system
 Vendor Research
• First step is to identify a short list of vendors who will help
to shape business requirements.
• Identifying and researching all aspects of a vendor package
will assist companies in determining the total cost of
ownership.
• An exhaustive list of vendors is important for a successful
implementation using current web search engines.
• Ask department managers and subject matter experts for
their input in vendor selection.
• Including end-users will help with change management
and also help to gain trust for later in the implementation.
 Vendor Research (Cont’d)
• Consider the following for vendor selection.
– Other businesses using the vendor
– The vendor’s financial position
– The vendor’s implementation philosophy and support issues
– The hardware and software infrastructure used to support the
ERP
– The vendor’s direction and currency of software
– The vendor’s release and upgrade strategies
– The vendor’s user-base involvement in defining future
functional changes
– The vendor’s development and maintenance resources
 Short List of ERP Vendors

• SAP—Solutions are for all types of industries and for

every major market. Its products include mySAP
Business Suite, SAP NetWeaver, and solutions for small
and midsize companies (e.g., SAP Business One and SAP
All-in-One).
• Oracle/PeopleSoft — (Acquired PeopleSoft in 2004)
Provides solutions divided by industry category.
• Lawson —Provides industry tailored software
solutions.
• SSA Global—(Acquired Baan in 2004.) Claim to offer
solutions that accomplish specific goals in shorter time
frames.
 Short List of ERP Vendors (Cont’d)

• Great Plains- Part of the Microsoft Business Solutions

group of products, its solutions can be tailored
according to business needs.
• Epicor- Focuses on enterprise software solutions for
mid-market companies.
• Infor Visual- Flexible, fully integrated, and easy-to-use
ERP suite that is widely deployed across many
industries from aerospace to biomedical, capital
equipment, precision tools etc.
• Plex Online- Plex Online provides a full suite of
enterprise resource planning, manufacturing execution
system, and supply chain management solutions
Matching User Requirements to Features
• Identification and documentation of user and system
requirements can be done by documenting current
legacy system functionality or by using business
process re-engineering.
• Two major documents are often a result:
– Data and functional flow of departmental or business
processes.
– Table or description of functions in each department and the
level of importance of each function.

• Identifying vendor system functionality based on

documented processes will help to purchase a system
based on facts.
Request for Bids (RFB)
• Often known as Request for Proposals (RFP)
• Expensive and time-consuming process for both the
company and vendor, but it can yield significant
software savings when done right.
• RFB should always include the following:
– Type of ERP system the company wants with specific
functionality
– Specified hardware and software infrastructure
– Training requirements
– Any specific contract issues required by the company
 Vendor Analysis and Elimination

• Office staff will need to evaluate functionality.

• IT staff will evaluate the technology requirements.
• Contract staff will need to evaluate the contract and
pricing of the system.
• No vendor will meet all requirements so vendor
discussions and negotiations should focus on the best
fit for the business.
• Develop and analyze the total cost of ownership
(TCO).
Contract Management and License Agreements
• Talks should center on the products included in the
purchase and maintenance terms of each product.

• Professional services for the implementation or

installation can be included or bid separately.

• Contract life cycle management will need to be

addressed during contract talks.

• Things every ERP contract should have:

– All deliverables must be clearly identified with delivery dates
associated.
– Ensure that you, the customer, have acceptance authority.
– Identify those responsible on both sides for contract
management and who has the authority to authorize changes to
the contract.
Contract Management and License Agreements (Cont’d)
• A quality manager or contract monitor appointed by the
program manager will have primary responsibility for
making sure both sides abide by the terms and
conditions of the contract.

• Changes should only be made when necessary due to

unforeseen circumstances, mutually beneficial reasons,
or unintended mistakes.

• Communicating progress keeps all involved and will

also help to maintain momentum.

• It is best to over-communicate during this phase:

Communicating progress keeps everyone involved
 Implications for Management

• Management must play a role in choosing the right

system that will meet the company’s needs and
requirements.

• Management must allocate enough time to evaluate

the system, observe a complete and comprehensive
demonstration, and communicate to references and
others using the system.

• Discussions with the vendor about future

improvements and direction must be scheduled.

• Negotiating with two vendors is time-consuming, but it

will yield a better purchase price.
Lesson Overview
• A state-of-the-art ERP system purchase will likely mean the replacement
of the current hardware and software infrastructure.
• Identifying and researching all aspects of a vendor package and the
platform that the hardware and software runs on will assist companies in
determining the total cost of ownership (TCO).
• In general, identifying vendors today is not overly difficult. Using current
Web search engines is a good starting point. It also helps to know what
packages the competition uses. An exhaustive list of vendors, even if you
do not research them completely, is important for a successful
implementation.
• Another strategy to identify vendors is to ask department managers and
subject matter experts if they know of vendors that should be considered.
It will be said many times, “the process is important,” so including end
users will help with change management issues later in the project. It will
also help to gain and secure trust for later in the implementation.
 Summary
• The majority of ERP systems today are purchased

• Steps involved in purchasing a system include:

– Vendor research
– Defining business requirements
– Requesting information
– Matching requirements to system functions
– Request for bids
– Analyzing vendors
– Meeting business needs
– Determining total cost of ownership
– Negotiating a contract and license agreement
 Summary (Cont’d)
• A business must deal in facts with every step of
purchasing an ERP system. A decision will be made
based on:
– Gathering information
– Researching vendors
– Documenting business processes
– Reviewing vendor bids.
• During the implementation phase, it is important to
know detailed information on ERP system functionality
and business requirements as it is the basis for setting
implementation expectations.
Question & Answers